FTC Issues Warning: Crypto Deposits Not FDIC Insured
The U.S. Federal Trade Commission (FTC) has recently issued a warning to consumers regarding the lack of Federal Deposit Insurance Corporation (FDIC) insurance for cryptocurrency deposits. The agency emphasizes that if a crypto company goes under, the money deposited with them may not be protected or insured by the government.
FTC’s Crypto Warning
In a Consumer Alert released by the FTC, consumers are urged to be aware that crypto assets are not FDIC-insured like traditional bank deposits. When a bank is FDIC insured, depositors are protected for up to $250,000 in the event of a bank failure.
However, the FTC highlights the crucial distinction for crypto-based financial services providers. If you deposit funds with such companies, the money is not FDIC insured or protected if the company were to fail. The agency specifically mentions the case of Voyager Digital LLC, a crypto-based financial services provider that misled customers by claiming that deposits through their app were FDIC insured if anything went wrong.
Cristina Miranda, a Consumer Education Specialist at the FTC, clarifies that Voyager was never an FDIC insured bank and emphasizes that FDIC insurance does not cover cryptocurrencies or crypto assets. As a result, when Voyager eventually failed and filed for bankruptcy, customers were locked out of their accounts and lost money.
The FTC has taken action against Voyager and its affiliated companies, imposing a permanent ban on offering, marketing, or promoting any products or services that involve depositing, exchanging, investing, or withdrawing any assets.
Understanding the Risks
It is crucial for consumers to comprehend the risks associated with crypto deposits. Unlike traditional banking systems where deposits are insured by the FDIC, the same level of protection does not exist for cryptocurrencies.
When considering depositing funds with crypto-based financial services providers or engaging in crypto-related activities, it is essential to carefully assess the risks, conduct thorough research on the company’s credibility, security measures, and regulatory compliance.
The Government’s Obligation
The FTC’s warning also highlights the fact that if something were to go wrong with a crypto company, the government might not have any obligation to intervene and help recover lost funds. This lack of government-backed protection further emphasizes the need for consumers to exercise caution and take personal responsibility when engaging with cryptocurrencies and related financial services.
Frequently Asked Questions
1. Are crypto deposits FDIC insured?
No, crypto deposits are not FDIC insured. The FDIC only provides insurance for deposits held in traditional banks, not for cryptocurrencies or crypto assets.
2. What happens if a crypto company fails?
If a crypto company fails, there is usually no government-backed protection or insurance to recover lost funds. Customers may face the risk of losing their deposits if the company goes under.
3. How can I protect my crypto assets?
To protect your crypto assets, it is important to choose reputable and regulated crypto-based financial services providers. Conduct thorough research, ensure proper security measures are in place, and consider using hardware wallets for added security.
4. Is it safe to deposit money with a crypto-based financial services provider?
While there are reputable crypto-based financial services providers, it is crucial to exercise caution and conduct thorough research before depositing money. Look for companies that are properly regulated, transparent about their security measures, and have a track record of reliable service.
Remember to always assess the risks involved and make informed decisions when engaging with cryptocurrencies and related financial services.
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